The price spread between USA benchmark WTI and Brent has widened to more than $7 a barrel.
The bottleneck in North America likely contributed to a 4.9 million barrel rise in US crude oil inventories, to 435.6 million barrels, that the private American Petroleum Institute reported on Tuesday.
USA light crude was 26 cents lower at $70.69 a barrel, also not far off its highest since November 2014.
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
World oil prices have surged more than 70 percent over the a year ago as demand has risen sharply while production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers, including Russian Federation. The coming USA sanctions pushed up oil prices last week after President Donald Trump withdrew the United States from the nuclear deal.
Stronger oil prices are also spilling into other markets.
Current prices are far higher than the United States Energy Information Administration (EIA's) May Short-Term Energy Outlook forecasts, which put Brent crude oil price at an average of $71 per barrel in 2018, $7 per barrel higher than last month's forecast.
Senior oil and gas equity analyst Iain Reid at Macquarie Group said that the reason for the market being as tight as it is at the moment is due to Opec failing to "open the floodgates" to compensate for the lost Iranian barrels, but also the decline in production in Venezuela, another Opec nation. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil. With Japan and South Korea already indicating that they will aim to attain a waiver from the USA in order to continue buying Iranian crude, the impact of Trump's actions will rest on how far he goes in comparison with Obama's previous sanctions.
The key oil demand growth center-China-has just beaten its own imports and refinery runs records, as refined oil product exports jump and domestic crude oil production hits seven-year-lows.